How Do You Finance Buying a Car?

Buying a new car is expensive, and very few people can afford the purchase without examining their finances first. There are numerous finance options available, but some are more complicated than others. Here we take you through the various ways in which you can finance your new car.

Personal Loan

Personal loans are usually a good way to buy a car, but this usually relies on having a good credit rating and a big deposit. One of the main benefits of a personal loan is that it can be arranged in a way most convenient to you, whether that’s over the phone or on the internet, and your repayment plan can also be arranged to your advantage. You can get a personal loan from a variety of lenders, including your bank, building society or finance provider, as long as you meet their credit requirements. Shop around for the best deals, by going direct or by using price comparison sites. Compare the APR quoted by different lenders for a true reflection of how much your interest rate charges will be. Equally, you could take out a loan to pay for half the car, and use your savings to pay for the other. You may also want to consider a Nemo Personal Finance Car Loan. A Nemo loan is secured on your home so always make sure you can afford the repayments.

However, before taking out a loan, make sure you check how soon the funds will be available to you, as well as any small print regarding the repayments.

Hire Purchase

Using the hire purchase method, your car purchase would be on finance (paying little or nothing up front) and you would pay in instalments to the car dealer over a set amount of time. Depending on how much you can afford to repay at a time, this can be between 12 and 60 months, you’ll usually need to put down a 10% deposit before driving away as well. The loan is secured against the car, meaning you wouldn’t own the car until the last payment (hence the name – ‘hire’ purchase). This is usually a good idea if you’re looking to buy a new car, as the cost of a hire purchase plan is often quite competitive for new cars. Like personal loans, they are relatively quick and easy to arrange, they have flexible repayment terms and only ask for a low deposit. But, if you’re looking for a short term agreement, this can be an expensive option.

Personal Contract Plan

A personal contract plan is similar to hire purchase, but the car buyer only pays the difference between its sale price and the price for resale back to the dealer. At the end of the term, you can hand the vehicle back to the dealer and pay nothing, start all over again with a different car, or pay the resale price of the car and keep it.

The benefits of financing your car with a personal contract plan include lower monthly payments, flexible repayments terms, and a choice of what to do at the end of repayment term.

According to The Independent, the mileage and the condition of the car will affect the costs. While you might be paying less monthly, you will be paying more overall, and may have to pay the outstanding balance to keep the car.

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